Southern Corporation has a capital structure of 4 0 % debt and 6 0 % common equity.
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Question:
Southern Corporation has a capital structure of debt and common equity. This capital structure is expected not to change. The firm's tax rate is The firm can issue the following securities to finance capital investments:
Debt: Capital can be raised through bank loans at a pretax cost of Also, bonds can be issued at a pretax cost of
Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $ Flotation costs will be $ per share. The recent common stock dividend was $ Dividends are expected to grow at in the future.
What is the cost of external equity?
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